“Undermining” Pell

March 30, 2016

Danielle Douglas-Gabriel’s recent Washington Post story, “These colleges expect poor families to pay more than half their earnings to cover costs,” (March 16, 2016) makes a simple, yet critical point to all concerned about access in higher education: colleges and universities may admit students from low income families, and they may even provide generous financial aid – grants from federal, state, private and institutional resources as well as maximum subsidized federal loans and work/study – but unless that aid meets a student’s need, they will be forced to borrow more at unsubsidized rates in order to pay college costs. In fact, Stephen Burd from the New America Foundation, whose work is cited in the Post story, writes in his report, Undermining Pell: Vol. III , that many colleges and universities expect students from families earning less than $30,000 a year to spend half of their annual income on college costs.

The argument is also put forth in the story and in Burd’s work that wealthier colleges, with endowments in excess of $250 million, are pumping money into so-called “merit scholarships,” awarded to students with no or low financial need in order to increase their academic profile and thus their rankings, when in fact — according to the critics — they should be meeting a higher percentage of student needs. While there is no doubt that merit aid helps to enroll top students who might go elsewhere, the fact is they bring net revenue to the institution that helps to pay for grant aid to needy students. Without a discounted price, some of these low-need “merit” students would not have enrolled and revenue from them would be zero. As the airlines understand, a discounted seat that is full is better than a full-price seat that is empty.

That said, there are institutions that heavily discount just about every student in order to maximize enrollment, but who “cap” institutional grant amounts to needy students, resulting in “gaps” as much as $20,000 or more (a “gap” is the difference in the amount of money a student needs, determined by the federal formula, and the amount of money awarded to that student). If those students choose to enroll with the “hope” that they can borrow to make up the difference or that the university will eventually come through with more grant money, they tend to drop out at a much higher rate than those whose financial needs were lower and met.

Before changing its financial aid strategy this year, my institution – Drew University – found that students with financial gaps in excess of $13,000 dropped out at a rate that was 33 percent higher than those with lower or no gaps. With that knowledge at hand, we cut non-need based merit aid by almost 50% and increased need-based aid by a similar amount. Gaps will not be eliminated, but will rarely exceed $10,000 as opposed to $20,000 in years past. I expect this will increase the percentage of lower income students choosing to enroll at Drew as well as their retention and graduation rates – all good results.

Prior to Drew, I served as the chief admissions and enrollment officer at a major national research university and a top liberal arts college for a total of 21 years. While I was there, these institutions were committed to meeting the full demonstrated need of every student admitted. So there were no “gaps” as defined above. But our applicant pools were large and deep, which meant we could deny admission to some marginally qualified students because we could not meet their needs had we admitted them. In the admissions world, this is known as “need-aware” admission. Some would think this disgraceful – denying admission to students because they can’t pay (of course, we did not do that for the bulk of the candidates who were needy and well-qualified). But these institutions believed it was far more humane to make a full commitment to those students they could afford to assist, than a partial commitment to everyone. There is a better outcome for the enrolled student (they actually graduate, and with moderate debt), but also for the student who is not admitted and enrolls at another good college with the aid he or she needs.

So there’s the rub – do we deny admission to some (lower) qualified applicants because we cannot afford to meet their full needs, or do we admit all those we would like to admit, without regard to their need, understanding that we may have a “gap” the very needy students? Most institutions cannot afford to be “need-blind” in admission AND meet the full financial need of everyone they admit. Generally speaking, only the uber-selective and wealthiest institutions can do this.

The Pell Grant is the major federal student financial aid grant program, providing about $32 billion in grants of up to $5730 per year to about 10 million low income students. In their July, 2013 report (“Measure Twice: The Impact in Graduation Rates of serving Pell Grant Recipients”) the Advisory Committee on Student Financial Assistance reported that “Overall, as the percent of students (at a college) who are Pell recipients rises and endowment per student falls, average 6-year graduation rate falls from 85% to 33% (in private 4-year colleges)…(and)..from 67% to 28% (in public 4-year colleges).”

What this means is that the more financially challenged an institution, the less selective it can be, the more low income students it attracts, and because these schools need to accept as many students as they can, the more they tend to “gap” low income students, making them borrow beyond the maximum subsidized federal loans for which they are eligible.

Understanding that there are wealthy institutions that can meet full need and be need-blind in admission, that there is a strong second tier that are need-aware in admission but meet full need, and that there are many under-endowed private and public institutions that admit needy students without meeting their full needs, it is clearly not accurate to paint higher education with the broad brush of retrenching on access. In fact Burd does acknowledge that some wealthy institutions are doing a good job of meeting full need and enrolling a healthy percentage of low income students. But in many ways, less well endowed private institutions and many publics are caught between the proverbial rock and a hard place. Their costs have risen as their students demand more technology and modern facilities, as salaries escalate to remain competitive and as government regulatory requirements balloon.

But unless they represent a “name brand” or have outstanding regional reputations in certain professional fields, many families are unwilling to pay the full price without a discount. This limits the options these institutions have to fully fund very needy students. Its not that these colleges want to gap low income students, forcing them to borrow heavily if they enroll. I would submit that they simply do not see a way around it.

Unless the cost of educating a student declines and/or federal and state aid increases, the gapping practice is sure to continue. What may be of great help, however, is training college counselors to help guide low-income students to a “financial aid fit” college. In those low income school districts, where counselors have responsibility for over 600 students each, a federal-state partnership could provide funding for guidance in matching a student to a college with the right financial fit. This could go a long way to controlling student debt and assuring access.

Let’s stop implying that commitment to access is measured solely by the percentage of Pell Grant recipients an institution enrolls and by the percentage of need it meets, but rather by the percentage of low income students it graduates with debt levels that are similar to the national average or lower. If we do, our dialogue will move from finger pointing to helping students make good choices for their future.